| What is
1. Total Revenue
2. Average Revenue
3. Marginal Revenue | 1. Total Amount of Money from a Firms Sales
2. Simply just the Price. (Revenue per Unit Sold0
3. Extra Revenue gained from selling the Final Unit of Output |
| How can a Firm’s Demand Curve show off Revenue? | -Demand Curve tells the Firm how much can be Sold at a Given Price
-Demand Curve can also be called AR.
-Firms Total Revenue can be drawn from a Rectangle from the Point of Origin, to the Price, to the Quantity, to when they Meeth |
| What type of Demand Curve will a Price Taker Firm have? | -Price Taking Firms have little Power to control the Price - they have to accept the Market Price
-This makes it Completely Flat - Perfectly Elastic Demand. This means that MR is always Constant.
-NOTE: This is the Firm’s Demand Curve NOT The Market One. HOWEVER, the Market Price IS THE SAME as the Price in the Perfectly Elastic Demand Curve |
| What happens with AR and MR for a Price Taking Firm? | -Since the Price will be the same no matter the Output Level, MR will equal AR as each Unit brings the Same Revenue as Before. This means TR rises as a Straight Line
NOTE: This doesn’t mean that MC also Flatlines - THERE IS A MAXIMUM until MC are Higher than MR |
| What are Price Makers known as? | -They are named Monopolists. They have the power to set the Price they want to sell at
-Hence, their AR or Demand curve will be sloping Downwards. More Sales —> Less Price |
| Where would TR be Maximised in a Down-sloping Demand Curve? | -TR is Maxed when the PED = -1. In the Demand Curve, there will be a Point on it (usually the middle) where there is Maximum Revenue. This is when PED = -1 (or 1) This makes sense - when the Demand is Elastic, the Price is often too high so less Consumption (eg)
-Also, TR iis Max when MR is = to 0. This thus means that the Monopolist Firm has reached a Point where selling more becomes Pointless |
| Why is it bad to say Revenue or Marginal Revenue becoming Negative? | -This is because it doesn’t make basic Economic sense, unless the Firm is PAYING the Consumer to Consume. Usually, it would be best to just show it as APPROACHING 0, not AT 0
(So MR = 0 is more at the Point where MR has very insignificant gains) |
